Capitalism and Culture
I had always thought that in order to help people of the world to prosper, we must teach those in underdeveloped countries how to be entrepreneurs, showing them the better way to prosperity. How wrong I was. The idea of the "free market" can be imparted with difficulty. The benefits of the "invisible hand" must come to those prepared to receive it. Those cultures receptive to this idea are the final determinants to success in business. The history of efforts to persuade people to become free marketeers is a history of many defeats and few victories.
Let me give you an example: a group of volunteer economists went to Ghana to teach the natives how to be entrepreneurs in order to better their lives. One of the Ghanian students said, "What you have told us is very interesting, but I will have to clear it with my tribal leader." Obviously, this effort was not the way to go. Culture trumps reason
Another example of the absence of the "spirit of capitalism" in a culture is that of the Pima Indians of southern Arizona. They have punished, in the past, anyone who stands out, even to the point of expelling them. When the children go to high school with Anglos, they will not raise their hands to answer a question. If called upon, they will not speak. The rest of the students find them unfriendly without realizing theirs is a cultural check on behavior.
Culture trumps reason.
My favorite example of the rejection of reason is the story of the movie company that came to a small village in Italy to produce a film. The filmmakers noticed that the women of the village walked more than two miles to get water, which they carried back to the village. The filmmakers decided to put in pipes from the water site to the village to carry the water, thus giving the women a respite from the heavy burden of transporting it. When the filmmakers returned to the village some years later, they found the pipes unused and the women continuing to carry the water by hand. The women wanted to do what they had been doing, in the way they had been doing it, and no one was going to change it.
Once again, cullture trumps reason.
What makes capitalism natural to some societies and anathema to others can be found in Max Weber's book, The Protestant Ethic and the Spirit of Capitalism. Weber says that Protestants believed that due to original sin, everyone was predestined to burn in hell. There were to be some exceptions to predestination who would be called "the Select" because they would be spared. How did people know who was one of the select? Because God would never doom anyone whom he had already made successful, those who achieved success had taken the only avenue left to the non-aristocratic class.
That avenue was business and therefore the road to survival. I would replace the original sin thesis with a more universal one for those non-imbued with the beliefs of the dissenters. That thesis proposes that those who believe in self-reliance, which results in capitalistic success, have adopted the Protestant ethic. There was no intermediary such as a priest, nobleman, or king, to rely on for direction. One had to be responsible for one's own efforts. Protestants had to read the bible themselves. They knew every page. No one was there to provide commentary. The dissenters who came to Plymouth Rock became the most literate people in the world. When the commons turned out to be a failure, they fended quite well for themselves by giving each family their own plot.
The Protestant ethic brought Holland financial success. Although Holland was a small country that had fought an 80-year-old war against their Spanish oppressors, they, as Barbara Tuchman describes in The First Salute:
"Through extraordinary enterprise and force of necessity, they had expanded their commerce and shipping until they had more than half the trade of Europe in their hands. More than three-quarters of the world's carrying trade was shipped in Dutch bottoms."
Max Weber would have found the Dutch a great example of his theory. Weber said that Jews and Chinese were also imbued with the equivalent of the Protestant ethic. What makes capitalism natural to some societies and anathema to others? Perhaps a look at Israel and China may reveal the answer.
Israel proves a fine example of success in the free market. Many American firms now have branches in Israel, and the year 2014 will see a rash of IPO's (initial public offerings) from Israeli companies which will become part of the American Stock Exchange. Even the kibbutzim were successful in business, despite their Socialist discussion of every enterprise. The spirit of capitalism always won out.
Compare this story of the successful kibbutzim with that of a collective farm after the collapse of the Soviet Union. No sign of a Protestant ethic there. The farm offered its members land of their own. Only one family took them up on their offer. The family worked from dawn to dusk, relishing the opportunity to have their own property. They somehow acquired the Protestant ethic. Maybe they were Jewish or Chinese. What happened to the rest of the collective? The remaining members spent their time in a drunken stupor. Tractors were rusting in the fields.
China has bloomed in contrast despite socialism. They have developed factories with products that go all over the world. Their success in business will never be able to atone for the deprivations fostered on the people by the government's "one child" policy and the imprisonment of thousands. The work ethic, natural to the Chinese, will never make up for the brutal totalitarian regime under which they live.
There is now a new automobile being manufactured in China, the world's biggest market for automobiles. It will be a joint venture of Israel and China called the "Quoros 3." China is forging ahead with a new freight rail link through Israel. The planned link could provide an alternative to the Suez Canal. It seems that birds of the Protestant ethic are flocking together.
All these examples of the success of the Protestant ethic show that culture is indeed the powerful factor behind capitalism.
Patrick Moynihan said, "Culture is more powerful than process or power."
Thomas Sowell said, "Those who say that all cultures are equal never explain why the results of those cultures are so grossly unequal. When some cultures have achieved much greater prosperity, better health, longer life, more advanced technology, more stable government, and greater personal safety than others, has all this been just coincidence? Moreover, people from other cultures are constantly migrating to these cultures, which fashionable dogmas say are no better than any other."
Maybe Max Weber was on the right track with the Protestant Ethic and the spirit of capitalism is able to emerge even where socialism seems supreme.
Just remember: culture trumps reason